Supply chain problems, increasing inflationary pressures, and rising energy prices are seriously slowing the global economy

The US stock market has demonstrated growth all last week. By the end of the trading week, all major indices increased. The S&P 500 index added 1.82%, while the Dow Jones gained 1.29%, both making new all-time highs. The NASDAQ technology index increased by 1.69% over the week. But the situation in the US stock market starts to aggravate and becomes uncertain. On the one hand, the active economic recovery and strong company reports can push the markets even higher. On the other hand, skyrocketing commodity prices and high inflation are some sorts of growth limiters. Moreover, some economists think that nominal inflation numbers do not reflect the actual situation. The next CPI data may be very negative, which, combined with the Fed's plans to start cutting QE programs, could lead to correction in stock indices.

The US Treasury Secretary Janet Yellen believes inflation will remain high through next year, but she expects an improvement in the second half of 2022.

The US President Joe Biden's work approval rating decreased by 11.3% since his inauguration. It is the biggest drop in the US president's approval rating since the beginning of the 20th century.

Four of the five FAANG stocks will report earnings this week. Facebook will report on Monday, followed by Alphabet's Google on Tuesday, both Apple and Amazon will report on Thursday. If stock indices start to decline after these reports, it will signify that hedge funds and big investors are closing their positions.

At the same time, Goldman Sachs analysts have updated many stocks to "buy" ratings in various sectors, including semiconductors, energy, and pharmaceuticals in the United States, Europe, and Japan. Meanwhile, Goldman Sachs lowered its 2022 GDP growth forecast for China to 5.2% from 5.6%.

The head of Ocean Community Categorical, which carries more than 6% of the world's container cargo, believes the supply chain disaster threatens the global financial system and could last at least another 12 months. Hence, the government needs to intervene urgently to help fix the disruption.

European stock indices closed the week mixed. By the end of the week, the British FTSE 100 index fell by 0.41%, the German DAX gained 0.16%, the French CAC 40 added 0.54%, the Spanish IBEX 35 decreased by 0.84% and became the biggest fall among the European indices, while the Italian FTSE MIB became a growth leader and gained 0.91%. The British Prime Minister Boris Johnson urged the public to get a third vaccination against the coronavirus. New coronavirus infections in Germany rose to May levels as the pandemic resumed with the onset of colder weather in much of Europe. Investors withdrew about $9.4 billion from United Kingdom funds in 2021 amid growing inflation fears.

The Bank of Russia raised its interest rate by 75 bps to 7.50%. Russia's average key interest rate through the end of 2021 is projected to be in the 7.5-7.7% range.

The switch from natural gas to oil increases demand by at least 1 mln BPD. With a low supply from OPEC+, oil prices continue to rise. WTI crude oil prices reached $84 a barrel in the Asian session today.

Gold increased to its highest level since early September on Friday but declined sharply by the end of the session amid statements by Fed officials that the quantitative easing program reduction will start soon. In anticipation of the beginning of "tapering," it is better to buy gold only in the short term, as the growth of government bond yields will reduce gold prices.

Stocks of copper in Shanghai have fallen to their lowest level since 2009.

Asian stock indices traded mixed last week. By the end of the week, Chinese stocks were positive as Chinese real estate developer Evergrande, which was close to the default, resumed work on more than ten projects and paid $83.5 million in dollar bonds at the end of last week. China's blue-chip CSI 300 index ended the week with a +0.76% growth, while Hong Kong's Hang Seng jumped by 2.76% and became a growth leader. Korea's KOSPI decreased by 0.38%, Japan's Nikkei 225 lost 0.99%, and Australia's ASX200 gained 0.73% for the week.

Consumer prices in Singapore rose faster than expected in September due to higher core inflation and housing costs. The consumer price index increased by 2.5% in September compared with the previous year.

The Turkish lira fell by 1.6% to a record low against the dollar in the early Asian session after President Tayyip Erdogan said he wanted to expel the US and nine other Western ambassadors from Turkey.

Main market quotes:

S&P 500 (F) 4,544.90 −4.88 (−0.11%)

Dow Jones 35,677.02 +73.94 (+0.21%)

DAX 15,542.98 +70.42 (+0.46%)

FTSE 100 7,204.55 +14.25 (+0.20%)

USD Index 93.61 −0.16 (−0.17%)

Important events for today:
  • – Singapore Consumer Price Index (m/m) at 08:00 (GMT+3);
  • – German Ifo Business Climate (m/m) at 11:00 (GMT+3).

by Justforex, 2021.10.25

We advise you to get acquainted with the daily forecasts for the major currency pairs.

This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.

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